Spiralling costs and the growing unease of the public sector means the plug will be pulled on the ailing #300m project next month.

Plans are already well advanced for a new #100m multi-purpose project which will give the city the multi-purpose concert arena and conference venue it craves.

It will also maintain the Kings Dock's role as an important plank of Liverpool's bid for the Capital of Culture title.

But Everton Football Club is set to be left out in the cold.

Everton lost its status as preferred bidder for the prestige waterfront site at the end of December.

But it was hoped that a rescue package brokered by Everton deputy chairman Bill Kenwright could keep the project alive.

The Daily Post can reveal that businessman and former Everton director Sir Desmond Pitcher was one of the key figures behind that Royal Bank of Scotland-backed plan.

Sir Desmond and top architect Patrick Davies were working through development company Steeltower to produce a new scheme for the site, which would include the residential, commercial and leisure elements.

They had been involved with the Northstar Consortium, which put forward one of the rival bids Everton managed to beat off in the original race to secure preferred developer status for Kings Dock.

Steeltower planned to take over all the club's existing property assets, including Goodison Park and its Bellefield training ground, in return for bankrolling the project.

But according to an informed public sector source, Steeltower's "due diligence" financial investigation of the Everton plan has revealed that building costs for the arena have shot up from #155m to #170m in the past two years.

The shortfall cannot be made up, and our source claims the club has been seeking to come up with a cheaper arena design, sacrificing the retractable roof and the sliding pitch which gave the plan its versatility.

The concept was for a 55,000 seat soccer stadium that could be converted into a variety of smaller indoor venues to provide everything from a major concert hall to a sophisticated conference venue.

Last night, the source said: "Their new plan is to take off the sliding roof and, instead of having a pitch that rolls out, have one that is taken out in chunks, like the Millennium Stadium in Cardiff.

"That proposal is unacceptable to the public sector. That is not the vision that we bought into.

"They are shaving off the bits that made it attractive to us"

The source said the only remaining hope for the project would come if Everton could raise the extra #15m - or agree to surrender its 50pc equity stake in the project and agree to lease the stadium instead. But both prospects appear remote.

A clearly shocked Mr Kenwright last night said he was unaware of the problem, and emphatically denied that the club was moving away from its original vision for the arena.

He told the Daily Post: "There is no question Everton would ever be interested in anything other than the original concept."